As many as 2,000 poor people in Minnesota risk losing their housing by this summer. The federal Housing and Urban Development agency has cut the money it spends on a rental assistance program called Section 8. Federal officials say they're following Congress' order to cap a program whose costs are increasing 30 percent a year. The reduction is causing local housing officials to scramble for ways to avoid forcing people out of their homes.

St. Paul, Minn. —
St. Paul resident Maymounah Omar is a survivor.

She and her husband escaped Ethiopia as refugees from war. They came to this country 21 years ago, started a business and a family. Her husband died last year. At the same time she worried about the well-being of her son, a U.S. Marine in Iraq.

"(I)used to worry too much, crying day and night, and finally thank god he come back," she says.

Omar, the mother of five, has been a Section 8 voucher holder for nearly eight years. She says she's disabled and can no longer work. Her new worry is Section 8 funding cuts will force her out of her St. Paul home.

"My kids -- they are still in college and high school and I'm worried about it," says Omar. "I think about it day and night. If I lose this voucher I can't pay the rent and maybe I'm going to be homeless."

Local officials say they're frustrated because the Section 8 cuts came with no warning. John Gutzman, executive director of the St. Paul Public Housing Authority, says he learned about the reductions when he saw the government's payments to his office last month.

"We heard it when HUD began paying us April 1," he says.

Gutzman says the cuts to his agency total $300,000 a month.

"You do the math on that. For 12 months we have a $3.6 million deficit."

The worst-case scenario, Gutzman says, is the reductions will mean that 400 of the 4,000 St. Paul families who have Section 8 vouchers will lose them.

Section 8 is a 30-year-old housing program started when Richard Nixon was president. It's become the country's largest government rental assistance program. Nationally, it serves more than two million families and costs nearly $15 billion.

About $149 million comes to Minnesota to pay for 30,500 residents with Section 8 vouchers. All of the recipients live in privately-owned rental housing. None of the money goes directly to them. It's paid to the property owners.

"They can look at their rent reasonableness standards, and look at whether the rents they are currently paying or the subsidies they are currently paying, are in fact in line with what is going on in the market," Liu says.

Liu says Section 8 fraud may run as high as $1 billion a year, and officials can do a better job of screening voucher holders.

Jeff Gaffany, the director of the Ottertail County Housing and Redevelopment Authority, says a small amount of fraud exists in the system. However most of the 325 Section 8 voucher holders in the west central Minnesota area he serves are people who have no control over their lot in life.

"A greater share of our program, you know 50 percent, 60 percent of the people we help are handicapped, elderly, disabled individuals," Gaffany says.

In Minneapolis, 4,800 families have Section 8 vouchers.
Minneapolis Public Housing Authority deputy director Tom Streitz says many are younger families trying to get off welfare.

"Many families are struggling with child care and trying to get on their feet, so this program is a way to transition from public assistance to being fully independent," Streitz says.

Streitz says the share of the rent paid by Section 8 voucher holders increases as their incomes rise. That's the other solution offered by HUD to local officials for dealing with reduced Section 8 funding -- tell the voucher holders they'll be paying a larger share of the rent. Minnesota Housing Finance Agency commissioner Tim Marx says many recipients can't afford to pay more.

"These are people who are very low income. I think the average income in Minnesota for one who receives a voucher is $8,600 a year. If you ask them to pay more we're in a situation where they are deciding what other necessary expenditures they'll have to cut back on," Marx says.

The Section 8 cuts have caused an uproar. Officials around the country are protesting. Minnesota Gov. Tim Pawlenty fired off a letter to the HUD secretary and won a face-to-face meeting to talk about the issue -- apparently to little avail.

Louder protests are likely. On the drawing board is a proposal from the Bush administration for deep cuts in HUD rental assistance programs in outlying years.